Correlation Between GM and IMine

Can any of the company-specific risk be diversified away by investing in both GM and IMine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and IMine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and IMine, you can compare the effects of market volatilities on GM and IMine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of IMine. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and IMine.

Diversification Opportunities for GM and IMine

-0.71

Correlation Coefficient

GM  IMine

Pay attention - limited upside

The 3 months correlation between GM and IMine is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and IMine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMine and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with IMine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMine has no effect on the direction of GM i.e., GM and IMine go up and down completely randomly.

Pair Corralation between GM and IMine

If you would invest  4,355  in General Motors on January 24, 2024 and sell it today you would earn a total of  155.00  from holding General Motors or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

General Motors  vs.  IMine

General Motors

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

IMine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IMine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IMine is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and IMine

The main advantage of trading using opposite GM and IMine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, IMine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IMine will offset losses from the drop in IMine's long position.

The idea behind General Motors and IMine pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.